Ken's oil for brooms deal: fuel for us, a clean-up for Caracas

Hugo Chávez and Ken Livingstone at a rally in London. Photograph: Leon Neal/Getty

The point at which President Hugo Chávez decided that London should serve as a model for services and governance in Caracas was not immediately apparent. He came in May, visited City Hall amid much controversy and fanfare, and was soon gone.

But the result of his visit is likely to be an extraordinary deal struck with London's mayor, Ken Livingstone, that would see Caracas benefit from the capital's expertise in policing, tourism, transport, housing and waste disposal.

London, meanwhile, would gain the most obvious asset the Venezuelans have to give: cheap oil. Possibly more than a million barrels of the stuff.

South American diesel would be supplied by Venezuela - the world's fifth-largest oil exporter - as fuel for some of the capital's 8,000 buses, particularly those services most utilised by the poor.

The exchange arises from the high-profile offer President Chávez made to London during his visit to City Hall in May. Since then officials have been meeting in London and Caracas to bring the barter deal about.

Yesterday Mr Livingstone confirmed that the agreement was in the making, and finer details were being thrashed out.

"We have poor people in London. We are the richest city in Europe and yet we have the disgrace of child poverty," he said. "They have a vast population living in slums, and we have a lot of experience in terms of housing policy and all the things we know about how to take a city and make it function."

But opponents on the London assembly, who want to question the mayor at City Hall today, are unconvinced. Angie Bray, the leader of London's Tories, dismissed the scheme as a "socialist propaganda fest".

She said: "Ken and the president of Venezuela should be ashamed of themselves for even contemplating such a proposal. I'm sure the Venezuelans who struggle below the poverty line, many of them critically so, would be shocked at the cynical siphoning off of their main asset to provide one of the world's most prosperous cities with cheap oil."

Mike Tuffrey, the leader of the Liberal Democrats in London, said the deal smacked of aid, not trade. "This reduces us to the status of a third-world barter economy. We should be weaning ourselves off fossil fuels, not trying to get them at subsidised prices from Venezuela."

Details of the deal under discussion emerged in a memo seen by the Guardian that described the progress of meetings between the mayor's most senior officials, embassy officials and figures from PDV UK, the Venezuelan state oil company.

It said London would receive an unspecified amount of oil as part of the 1.3m barrels needed to run the buses each year. In return the mayor's aides would promise to "actively and efficiently promote Venezuela's image in the UK" by highlighting the oil deal's benefits for London's poor and by boosting tourism with advertisements on buses.

Caracas, it said, would also benefit from help in running its transport system and in fighting crime, using London's expertise in the use of CCTV, fingerprint technology and neighbourhood policing. Consultants would help with waste disposal, air quality and adult education.

Among those who could go to Caracas to give advice are Mr Livingstone's economics director, John Ross, who has been involved in the talks, and John Duffy, London's waste disposal and environment tsar.

The memo revealed that the president's initial proposal, to supply heating oil to "young people, schools in working-class areas and the homes of elderly people" was dropped because too many UK authorities would be involved. Officials preferred the bus plan for its simplicity and its ability to help the poor directly. They might receive a "special identity card" to access cut-price bus tickets, thereby sharing the fare subsidies that already apply to children and pensioners.

The practicalities of delivering the oil were also discussed. One option involved UK suppliers Shell, Chevron and Conoco providing the oil to London and being reimbursed with an equivalent amount from PDV UK in Venezuela.

Mr Chávez has repeatedly been accused of using oil to increase his own influence. Last year Venezuela gave more than 45m litres at 40% below market prices to the poor of Boston and New York. A group of Caribbean countries also received cheap oil.

But he also favours barter arrangements. Cuban doctors are working in the poorer areas of Venezuela in exchange for the supply of cheap oil to their country.